We are increasingly being tasked with taking charge of our own retirements, be it through pension schemes, ISAs or other saving and investment vehicles. And although financial advisers can offer a world of help, you still need to understand investing to make sure your investment plan is really the right one for you. It can be daunting to try to master the information you need to do this: The fastest and easiest way to learn about investing is on the Internet, where you can find lots of data about virtually any stock, bond, or mutual fund under the sun--but there's so much that it can be easy to suffer from information overload.
A big part of what we do at Morningstar is help people to make sense of all that information, and Morningstar.co.uk has lots of free tools that can help with that goal. You can find links to all of them on our tools cover page. Here's an overview of those that are especially useful for beginning investors, including some tips on how to use them most effectively.
Narrowing the Field: Morningstar Fund Screener
One of the most daunting factors that any new investor faces is the sheer number of choices available. There are thousands of funds available for sale in the UK. Fortunately, you can turn to the Fund Screeners on Morningstar.co.uk to help narrow down the field. We currently offer screeners for OEICS/Unit Trusts, Life & Pension Funds, and Closed-end Funds.
The Fund Screener lets you choose among several options for a wealth of different data points, including Morningstar category, IMA sector, fund company, base currency, ISA status, domicile, distribution status, costs, Morningstar Rating for funds, risk, returns, and equity and fixed interest investment style. For example, you could screen for large-cap value UK equity funds with 4 or 5 stars, assets of less than £1 billion, initial charges below 4% and a TER less than 1.5%. When you get the results, you can look at them using any of four views (Snapshot, Performance, Portfolio, and Nuts & Bolts), and you can sort them by clicking on any of the column headings, such as Expense Ratio or Total Assets.
The Big Picture: Instant X-Ray and Portfolio Manager
Finding good individual funds is important, but that's just a first step. It's just as important to make sure that your holdings fit together coherently in a portfolio and that this portfolio has the characteristics you want. For such big-picture analysis, Morningstar.co.uk offers a couple of useful tools with which any beginning investor should become familiar: Instant X-Ray and Portfolio Manager.
Instant X-Ray allows you to see the key features of any portfolio at a glance. To use it, enter a ticker symbol and an investment amount or per cent allocation for each holding and click Show Instant X-Ray. You'll see a comprehensive summary showing the portfolio's stock/bond/cash mix, style-box characteristics, sector, stock type, and regional distribution, average fees, and average stock stats, such as P/E and market cap. Several of these measures are shown relative to index weightings (the index is MSCI World by default, but you can easily customize this using the drop down menu at the upper right), making it easier to see whether you might be overweight or underweight relative to that index. By using the drop-down menu, you can get more detail in any of 10 other views; for example, Stock Overlap shows you any overlap of individual stock holdings between funds in your portfolio.
Once you have the portfolio you want, you'll need to keep track of it, and Portfolio Manager makes that task easy. You'll need to choose whether to create a Transaction Portfolio or a Watch List Portfolio, the main difference being that a Transaction Portfolio allows you to keep track of when you buy or sell shares over time and gives you access to your portfolio's Personal Returns.
After you've created or imported a portfolio and saved it, Portfolio Manager allows you to slice and dice it in all kinds of useful ways. The Snapshot tab give you a useful overview of key information for each holding tab, performance gives youthe performance of each holding and your portfolio over standard periods as well as since purchase. Gain and Loss and Fundamentals tabs offer even more information about your holdings. The icons along the top allow you to create a new portfolio; modify, rename, combine, or copy existing portfolios; sign up for e-mail alerts in order to keep track of your portfolios, and X-Ray your portfolio. X-Ray has the same information as the Instant X-Ray tool, but you can apply it to any of your saved portfolios, rather than having to re-enter all the portfolio details each time as Instant X-Ray requires.
Other Tools
The screening and portfolio tools that we've looked at here are the most important ones for beginning investors to be aware of, but there are plenty of others to explore once you have a handle on the basics. For example, the Fund Compare tool lets you compare up to five funds with each other. If you don't want to set up a full-blown screen, you can use our QuickRank tools to easily create custom fund lists--we have QuickRanks for Funds, ISA Funds, Life & Pension Funds, CEFs and ETFs. Links to all of these and more can be found on the Tools home page.
This article was first published in June 2008.
